A capital asset is defined to include property of any kind held by an assessee, whether connected with their business or profession or not connected with their business or profession. It includes all kinds of property, movable or immovable, tangible or intangible, fixed or circulating. Thus, land and building, plant and machinery, motorcar, furniture, jewellery, route permits, goodwill, tenancy rights, patents, trademarks, shares, debentures, securities, units, mutual funds, zero-coupon bonds etc. are capital assets.

Excluded from the definition

(financial accounting textbook[6] advises that the term be avoided except in tax accounting because it is used in so many different senses, not all of them well-defined. For example it is often used as a synonym for fixed assets[7] or for investments in securities.[6]

However this advice is questionable beyond the US private context. Several public sector standards in global use, notably triple bottom line accounting as defined by ICLEI for world cities, require that employees or the environment or something else be treated as a capital asset. In this context it means something managers have a responsibility to maintain, and to report changes in value as gains or losses.[8] See human capital, natural capital, triple bottom line, human development theory.

Capital assets should not be confused with the capital a financial institution is required to hold. This capital is computed from the right-hand side of the balance sheet while assets are found on the left-hand side.[6] See Basel III for a summary of how such requirements are proposed to be calculated.

See also


  1. ^ Eugene F. Fama and Merton H. Miller, The Theory of Finance, Holt Rinehart and Winston (1974).
  2. ^ a b c d Office of Management and Budget (OMB) Circular A–11: Planning, Budgeting, and Acquisition of Capital Assets, Supplement-Capital Programming Guide.(2-14) Accessed at [1]
  3. ^ Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, paragraph 19.
  4. ^ 26 USC 1221. Also see the discussion of capital gains and losses in IRS Publication 550.
  5. ^ See HMRC discussion of assets liable to capital gains tax.
  6. ^ a b c Clyde P. Stickney and Roman L. Weil, Financial Accounting, p. 622.
  7. ^ John Owen Edward Clark, Dictionary of International Accounting Terms, p. 98
  8. ^ David F. Robinson, "Human asset accounting", Long Range Planning, v. 7, i. 1, February 1974, Pp. 58-60.

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